Federal Reserve Bank of St. Louis President James Bullard urged additional interest-rate hikes to ensure inflation returns to the central bank’s 2% target over time.
(Bloomberg) — Federal Reserve Bank of St. Louis President James Bullard urged additional interest-rate hikes to ensure inflation returns to the central bank’s 2% target over time.
“Continued policy rate increases can help lock in a disinflationary trend during 2023, even with ongoing growth and strong labor markets, by keeping inflation expectations low,” Bullard said in prepared remarks for a presentation to the Greater Jackson Chamber in Jackson, Tennessee.
Fed officials have largely stuck to their view that interest rates need to rise to some level above 5% to contain inflation that’s proving stubbornly persistent. A report Thursday showed US producer prices rebounded in January by more than expected, following consumer price data earlier this week that didn’t slow by as much as forecast.
Taken with data out Wednesday that showed robust retail sales and better-than-feared manufacturing data, traders are upping their bets for greater Fed action. They began betting that policymakers will return to outsize interest-rate increases at their upcoming March meeting after one official suggested the case for such a move at its last gathering had been “compelling.”
Read more: Fed’s Mester Says She Saw ‘Compelling’ Case for Half-Point Hike
Continued hikes as well as a low level of inflation expectations “may combine to make 2023 a disinflationary year,” Bullard said. “In part due to front-loaded Fed policy during 2022, market-based measures of inflation expectations are now relatively low.”
The St. Louis Fed official also said he expects economic growth to moderate this year and the unemployment rate to return to a more normal longer-run level.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.